Centre on Monday announced frontloading one additional instalment of tax devolutions to States this month. This means States will be able to push the capital expenditure.

Finance Minister Nirmala Sitharaman announced this after over 6 hours of meeting with Chief Ministers and Finance Ministers of all States/ Lt Governors of UT in a virtual conference. This was the first of its kind meeting called to enhance the country’s investment climate in the wake of strong recovery and the opportunities accorded by a shift in geo-political realities post-pandemic.

“I have suggested to the Finance Secretary that on 22nd November, instead of the normal monthly instalment of tax devolution amount of ₹47,541 crore, I have asked to release another ₹47,541 crore - a total of ₹95,082 crore will be given to states on Nov 22,” Sitharaman said while addressing a press conference after the meeting.

As part of the Finance Commission’s recommendation, the Centre gives 41 per cent of tax collection to States. This amount is offered in 14 instalments, with the last three in March which also sees adjustment. Now one of the three instalments is being given as an additional one. “This is being done in consideration of the desire for states to have money in their hands, to help infrastructure creation expenditure,” she said.

She also informed that 11 states had achieved Q1 capital expenditure targets set by Finance Ministry, and have been given permission for additional borrowing. States are firmly moving on capital expenditure and are thereby in a position to borrow more. Adding to tha,t Finance Secretary T V Somnathan said: “Between April - September 2021, capital expenditure of 20 states for which data is available shows 79 per cent increase over the previous (pandemic) year 2020-21 and 23 per cent higher than the pre-pandemic year 2019-20.

The meeting was attended by Chief Ministers of Assam, Chhattisgarh, Goa, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Tripura, and Uttar Pradesh. Lt Governors of Jammu and Kashmir; Deputy Chief Ministers of Arunachal Pradesh, Bihar, and Delhi. State Ministers of Andhra Pradesh, Gujarat, Kerala, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttarakhand, and West Bengal; State Government Officials of Ladakh, Maharashtra, Jharkhand, Andaman & Nicobar, Chandigarh, Dadra and Nagar Haveli & Daman and Diu, Lakshadweep along with Secretaries of GoI Line Ministries, Chief Secretaries and Finance Secretaries Secretary (Economic Affairs), Joint Secretaries (Economic Affairs) and other officials of Centre and State.

Talking about ideas given by States, she said: “We had very very key ideas coming from states, and generic requests; examples - how some states have given project approvals, better dispute resolution mechanisms, enhancing road connectivity, ideas for immediate job creation. The need for offshore wind energy generation policy was highlighted by some states,”

She also said that one or two states suggested that surplus land available with Public Sector Undertakings can be considered to be given to states so that they can be used to do some projects such as setting up industry parks:

Earlier in her opening remarks, the Finance Minister emphasized that the economy has been growing significantly post the second pandemic and indicators such as imports, exports, PMI manufacturing, digital payments, etc. have already reached pre-pandemic levels. She highlighted that with a favourable international perception of India’s growth and in light of the structural, sectoral & financial, reforms undertaken by the Government of India, global and domestic investors are upbeat about the investment attractiveness of the country. States should leverage this opportunity to scale up investments and growth.

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